Photo | Courtesy of IPG Photonics
Valentin Gapontsev, the late founder, CEO, and chairman of IPG Photonics
August 30, 2024
IPG Photonics sells Russian assets for $51M, ending 34-year presence in country where it was founded
Image | Courtesy of Google Maps
IRE-Polus' facility is in Fryazino, Russia, a town about 16 miles northeast of Moscow.
Marlborough-based IPG Photonics Corp., a global laser manufacturing company founded in a Moscow basement laboratory in 1990, has sold its remaining assets in Russia, citing the impact of ongoing sanctions related to the country’s invasion of Ukraine.
The company sold its Russian subsidiary IRE-Polus for $51 million, according to a press release issued by IPG on Thursday. The company referenced the impact of sanctions on trade initiated after the start of the Russian war with Ukraine, as it marked its exit from the country after 34 years.
The buyers of IPG’s Russian operations are a group made up of the current management of IRE-Polus and Softline Projects, a Russian IT and cybersecurity firm. Softline Projects was spun off from London-based Softline Global in October 2022 due to the impact of war-related sanctions, according to Interfax.
“Our team executed flawlessly to transition our manufacturing operations after the war’s outbreak without any impact to our customers. Our ability to respond to adverse events out of our control highlights the resilience of the company as we were able to lean on our global manufacturing capabilities,” Mark Gitin, IPG Photonics’ CEO, said in the press release. “Today, with the sale of our Russian operations now behind us, we are focusing on optimizing our operations to drive improved productivity.”
IPG said its Russian operations account for less than 5% of IPG’s full-year revenue and this move is expected to reduce third quarter revenue by approximately $5 million.
Until the sale, IPG operated in Fryazino, Russia, a town about 16 miles northeast of Moscow, but had been reducing its reliance on its operations there since the war’s outbreak.
IPG continues to operate in nearby Belarus, but said in a July filing with the U.S. Security and Exchange Commission it has ceased new investments in its operations in the country. Belarus is under the pressure of Western sanctions for human rights violations and its support of Russia in its war against Ukraine, according to The Moscow Times.
Since the implementation of sanctions, IPG expanded its manufacturing capacity in Germany, the United States, and Italy, and added new capacity in Poland in an attempt to make up for its inability to utilize its Russian operations, according to a Thursday filing to the SEC.
Many Western companies, including Framingham-based TJX Cos., have ceased operations in the country since the war began, but the Russian government has fought back, freezing assets of some companies who have announced their exit, according to Foreign Policy.
For IPG, this sale represents the end of its long ties with Russia which were made complicated by the outbreak of the conflict, the largest Europe has seen since the end of World War II.
In January 2022, IPG disclosed it was facing a Department of Justice investigation after it exported products without receiving appropriate trade control authorizations. While IPG did not explicitly state the investigation included exports to Russia, it did express concern about potential disruptions to supplies from or to its Russian operations as a result of the probe.
The company said in a quarterly report for the period ending June 30, 2023 it believed the DOJ investigation had concluded, but other federal agencies may still be investigating their prior exports.
The company was founded in Moscow in 1990 by Valentin Gapontsev, a former member of the Soviet Academy of Sciences Institute of Radio-engineering and Electronics.
He began to shift much of the company’s operations out of Russia in 1994, citing a lack of business opportunities in the country, a Western belief Russian products were inferior, and political instability, according to a 2006 interview with The Register.
Gapontsev, who was raised in Ukraine, was added to a list of alleged Russian oligarchs created by the U.S. Department of the Treasury, a move leading to a lawsuit from him in January 2019.
Gapontsev’s lawyers argued the list was simply copied from Forbes’ list of Russian billionaires and the wrongful designation had cost IPG business. The Treasury admitted he did not belong on the list in September 2019, according to the Washington Post.
A resident of Worcester after he obtained U.S. citizenship, Gapontsev had an estimated net worth of $2.8 billion at the time of his death, according to Forbes, making him one of the 400 wealthiest people in America.
Between its Marlborough headquarters and a location in Oxford, IPG’s 1,840 employees in Central Massachusetts makes it the third largest manufacturing company in the region, according to data provided to the WBJ Research Department, trailing Dell Technologies and Boston Scientific Corp.
IPG has over 6,000 global employees, with operations in 21 countries.
Eric Casey is a staff writer at Worcester Business Journal, who primarily covers the manufacturing and real estate industries.
Most Recent
Most Recent
0 Comments